Macy’s is Low, But it Could Rise This Holiday Season


This morning, I’m recommending a bullish call option on Macy’s, Inc. (NYSE:M).

My indicators are giving neutral-to-bullish readings this week, unchanged from last week.

We got a decisive breakout as the S&P 500 jumped higher by nearly 1% on above-average volume, and as the chart below shows, the index has been on a bit of a record setting run.

Daily Chart of S&P 500 Index (SPX) — Chart Source: TradingView

The market may be getting a little overextended, but prior resistance tends to act as new support. If the market pulls back to the prior resistance zone between 3,000 and 3,030, I would expect to see some buyers show up.

M has been struggling since its poor earnings performance in August, but with a new report approaching on Nov. 21, I think the stock could rise in anticipation.

Retail Rising as the Holidays Approach

The market is certainly in a bullish mode right now, but not all sectors are participating in the current rally.

For example, we saw the travel stocks pull back sharply yesterday.

Shares of TripAdvisor (NASDAQ:TRIP) plunged 22%, and Expedia (NASDAQ:EXPE) crashed by more than 27%, as both companies reported earnings that were well below Wall Street estimates. Shares of Booking Holdings (NASDAQ:BKNG) dropped 8%.

The retail sector, represented below by the SPDR S&P Retail ETF (NYSEARCA:XRT), has gained about 18% since hitting a new 52-week low in August.

Daily Chart of SPDR S&P Retail ETF (XRT) — Chart Source: TradingView

Part of XRT’s recovery is probably due to optimism around the upcoming holiday shopping season. Consumer confidence was relatively flat in October, and Lynn Franco, the Senior Director of Economic Indicators at The Conference Board, said there was no reason to believe consumers wouldn’t turn out this season.

Retail stocks usually report late in the season, so we are still waiting to see how the big retailers did in the third quarter. M performed poorly last quarter, and a beat — even a slight one — would benefit the stock.

Could M Challenge Resistance?

At M’s last earnings report, the company missed earnings per share estimates by over 35%, though it did beat revenue expectations. You can see in the chart below that the poor earnings report caused M to gap lower.

Daily Chart of  Macy’s, Inc. (M) — Chart Source: TradingView

M hadn’t been doing well for a long time, but its poor performance pushed it much lower. This low price and long-term push downward both mean M is extremely cheap, and that low price gives investors a chance to buy the stock before it bounces from holiday shopping.

Any buying at these low levels could push M toward the top of its August gap, which is why a cheap call option is an excellent way to take advantage.

Buy to open the Macy’s, Inc. (M) Jan. 17th (2020) $17 Calls (M200117C00017000) at $1.10 or lower.

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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.

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